Not Worth the Fight

Sometimes Truth is stranger than Fiction.

Having said that, it’s worth noting that homeowner’s insurance can provide a broad range of coverage.  In one case homeowner’s insurance covered a man who fell out of a tree while trying to lop off some large tree branches.  In another case homeowner’s insurance covered someone who fell through a glass topped table while dancing on it. In yet another case homeowner’s insurance covered a claim that a strand of bamboo in a drainage canal caused serious erosion to the property across the canal. Homeowner’s insurance can cover all kinds of things.  But can homeowner’s insurance cover two ears and a nose?

Homeowners insurance is almost always a good idea.  Most policies carry two kinds of coverage: coverage for the home and its contents, and also general liability coverage for the homeowner.  This general liability coverage won’t usually provide coverage for accidents or losses involving motor vehicles.  That kind of coverage is usually provided by a separate policy of motor vehicle insurance.  But if a covered homeowner is out golfing, and if they unintentionally hit a stray ball over a high fence so that it blasts through a million dollar stained glass window on the front of a mile high cathedral – well, there just might be coverage for that.  The general liability coverage in a homeowner’s policy can often provide coverage for all kinds of general liability where a homeowner might unintentionally cause loss or injury to someone else.  Many homeowners might generally think that this type of general liability coverage might only extend to an injury that occurs on the property – such as somebody walking past the house who steps on a rake, and where the rake flips up and gives them a smack right on the forehead.  Or the population of homeowners at large might think that homeowner’s general liability coverage might only extend to something like the homeowner who digs a trench across their front walkway and front yard to install a pipe, only to have a neighbor step into that trench with disastrous results.  Yes, such accidents might be covered.  But there can also be events off the premises that can be covered.  Some of these might be very simple.  Or some can be more dramatic – like one involving a nose and two ears.

Apparently a lawsuit was filed in the Federal District Court in Colorado that resulted in a trial in 1986.  In that case, the plaintiff (or “claimant”) filed a suit against an insurance company who had written a policy of homeowner’s insurance for a defendant.  Apparently the plaintiff had lost his nose and both ears, and had tendered a claim for compensation to the insurance company who had insured the defendant.  The insurance company denied coverage, and the plaintiff sued.  The person who lost their nose and both ears was named Maestas.  The defendant who was insured was named Castro.  In the court’s own words, here is what happened:

“Maestas [the plaintiff] and Castro [the defendant] were occasional drinking buddies who were acquainted through work and softball team activities.  On the night of December 5, 1982, they were drinking and socializing in a bar.  The evening’s events did not remain subdued and tranquil, however.  Epithets were exchanged and fisticuffs ensued.  Maestas and Castro were asked to leave the bar premises.  Round two took place in the parking lot.  Though each claimed the other was the initial aggressor, Maestas lost; his nose and ears were bitten off.

“Before this brawl Castro had hopes of becoming a policeman, but he entered the court system through the other door, so to speak.  He was convicted of criminal assault in the second degree and sentenced to four years imprisonment.”

“On May 3, 1984, Maestas filed a civil complaint against Castro in the state district court.  The complaint sought damages from Castro due to negligence!  One is puzzled by the allegation since at least three bites were required to achieve the damage inflicted.  Arguably such activity could be described as gross negligence, but I think the third bite pretty clearly elevates the activity to an intentional tort, however mindless it might seem.”

Maestas apparently tended a claim to the insurance company for coverage, which was denied.  Maestas then filed suit against the insurance company.  The trial court judge noted that the policy excluded coverage for claims that were “expected or intended by the insured.”  The Court found that biting off the nose and ears of another person required an intentional act (which was expected or intended), and therefore no insurance coverage existed.

As a result, Maestas not only lost the fight; he lost the lawsuit as well.  The case is reported as W. Am. Ins. Co. v. Maesstas, 631 F. Supp. 1565 (D. Colo. 1986).

Homeowner insurance policy coverages can involve complex legal issues.  Persons with coverage questions or issues should consult competent legal counsel.

Homeowner’s Insurance is Important

Several years ago a homeowner wanted to trim a large tree in his front yard. He got two friends to help him. The tree was so large that one of the friends climbed up into the tree.  The friend intended to cut large branches from the tree while he was standing in it.

A rope was obtained, and was tied onto one of the branches to help control it as it fell from the tree.  However, these men weren’t professionals, and there was a problem with the rope.  It failed to work as anticipated, and the friend in the tree lost his balance.  He fell out of the tree onto the sidewalk below, and landed on his elbows.  He ended up with serious injuries and he filed suit against the homeowner.

The homeowner had a policy of homeowner’s insurance, and the homeowner made a claim under the policy.  The insurer accepted the claim and defended the homeowner in the lawsuit.

Sometimes homeowners don’t realize that many (or perhaps most) homeowner policies provide two types of coverage.  The first type of coverage is usually for the house and its contents.  But there’s often also a second type of coverage that some homeowners may not be aware of.  This type of coverage often provides insurance coverage for many types of general liability claims.  This second type of coverage was the policy provision that provided coverage for the homeowner whose friend fell out of the tree.

Why does this make a difference?  Because some homeowners will ultimately pay off their homes.  Once they do, their lenders will no longer require that the homeowner purchase homeowner’s insurance.  But it’s always a good idea to carry such insurance, not only to protect the house and its contents, but also to provide coverage for liability for some accidents.  Coverage can vary from policy to policy, and homeowners should consult a professional in order to determine what their coverage needs are and the types of coverage their policy provides.

Don’t Be Pennywise and Pound Foolish

I understand the value of a nickel.  I do.

But I also understand the value of a dollar.  As a youngster, I heard the saying “Don’t be pennywise and pound foolish.”  The translated meaning of that?  It’s possible to be very careful about minor expenses – and then to lose large amounts of money due to poor judgment or bad decisions.

I sometimes see this in the context of good, honest, honorable hardworking people who have worked all their lives to put away something for retirement.  They’ve scrimped and saved and gone without so that they could put money away for the future.  That’s an admirable trait.  But when it comes to investment of the big nest egg they’ve saved, they lack the sophistication to properly manage their risk, or their investments, and sometimes they can lose a big part of what they’ve saved.  Sometimes it’s just back luck, but sometimes it’s a desire to save on the cost of employing a skilled professional.  There’s no law that says an individual has to hire a qualified portfolio manager to invest their life savings.  There’s no law that says an individual has to hire legal counsel to review a contemplated real estate transaction, or a change in title.  But these types of transactions can have hidden risks that an ordinary lay person might not appreciate, and a single misstep in these types of decisions can be costly.

Take, for example, a change of title.   Sometimes a couple may want to pass on one of their properties to a son or a daughter.  I often hear of this as just “putting someone on title.”  The concept is that the parents eventually intend to bequeath this property to their son or daughter anyway, so why not just put them on title now?  The potential downside is that such a simple transaction fails to take into account the many complexities that exist in a real estate transaction.

In the first place, many laws govern real estate transactions.  Some of these laws don’t apply to a transfer from parent to child, but others do.  A simple “paper transfer” won’t comply with many of these laws.  Why set up a transaction that doesn’t comply with the law?  That’s never a good idea.

In the second place, there can be unforeseen risks with “putting someone on title” regardless of whether it’s a brother, a sister, an uncle, an aunt, a friend or someone else.  What happens if that person runs into financial difficulty and files a petition in bankruptcy?  The bankruptcy trustee will probably want to know all real estate transfers made by this person in the previous 10 years.  There will be questions about who really owns the property.  If there’s a lot of value in the property, then creditors may be motivated to claim that the holder of title is actually the true owner of the property.  If that’s not the case, then perhaps a creditor’s claim can be defeated.  But this might involve a lawsuit, which can be expensive — and perhaps very expensive.

Or suppose title goes into someone else’s name, and then that person is sued – maybe they get into a car accident, or they have a business reversal, or whatever.  Again, creditors may be on the lookout for assets – and real property is like a big sitting target.  Ownership information is available to the general public, and it’s not difficult to access it if you know how.  Trying to convince a creditor that uncle Bill is just “holding title” may be expensive – and may or may not be successful.

And what about the tax issues?  There can be substantial tax benefits connected with a mortgage interest deduction that could potentially be affected by a poorly planned property transfer.  Or there can be issues with appreciation.  During some time periods, real property values appreciate.  This appreciation can be subject to tax in some circumstances, and this may be adversely affected by a casual transfer of title.  Moreover, property taxes are calculated on the value at a time of transfer.  If property is not held in the name of the true owner, then issues can arise about property taxes that might have been avoided had title been properly conveyed and titled.

Or what about potential liability of landowners?  Sometimes landowners can be liable for cleanup costs for pollution that occurs on their land, and sometimes they can be liable for accidents that occur on their land.  Persons who agree to hold title for someone else could unintentionally be setting themselves up for a big fight over who the true owner is, and what their liability could be for issues relating to the land.

As with many legal matters, real property title issues can be complex.  Persons interesting in selling property or in transferring title would do well to consult competent legal counsel.